Security company's response to a patent lawsuit: How about you pay us $43,000?

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The top US patent court has ordered a patent-holding company with a habit of dismissing cases rather than arguing its case in court to pay its opponent's attorneys' fees.

A panel of three judges on the US Court of Appeals for the Federal Circuit overruled (PDF) a federal judge in the Eastern District of Texas who allowed Rothschild Connected Devices Innovations LLC (RCDI) to walk away without paying legal fees of the company it had sued, ADS Security.

Further Reading

RCDI, owned by inventor Leigh Rothschild, claimed that ADS infringed his US Patent No. 8,788,090, which described a "system and method for creating a personalized consumer product." This patent originated with a 2006 application that describes a Star Trek-like Internet drink mixer.

Rothschild also sued ADS. The company responded with a letter explaining that his "invention" was too abstract to be patented, according to Section 101 of the patent laws, and that it was preceded by loads of prior art as well. Instead of offering to pay Rothschild a settlement fee, ADS said it would settle the case if Rothschild paid it $43,330 for attorneys' fees and costs. Rothschild declined.

Further Reading

ADS then filed a motion seeking to invalidate the patent—and sent Rothschild a copy of the motion for sanctions that it intended to file next. That's when Rothschild decided it was time to walk away. RCDI moved to dismiss its lawsuit. ADS opposed and filed a motion for attorneys' fees, saying the suit was unreasonable and that Rothschild's goal in filing more than 50 lawsuits in the court was to "exploit the high cost to defend complex litigation and extract nuisance value settlements."

The background context on ADS' motion is the Supreme Court's 2014 Octane Fitness decision that broadened the definition of what constituted an "exceptional" case for purposes of fee-shifting, making it easier for patent defendants to get legal fees paid to them.

US District Judge Rodney Gilstrap decided not to award attorneys' fees, saying that Rothschild's move to withdraw the case was "reasonable conduct" and that the patent-holding company had advanced "facially plausible arguments" that the invention was patentable.

Remarkable breadth

The appeals panel said Gilstrap's decision to not deem the case "exceptional" was an abuse of discretion.

The judges held that RCDI's "willful ignorance" of the prior art should have been considered. Both Rothschild and his lawyer submitted affidavits saying they'd done no analysis of any of the prior art in ADS' motion, but they continued to possess a "good faith" belief that the patent is valid and infringed.

"However, neither Rothschild's counsel nor its founder supports their declaration statements with examples of websites, product brochures, manuals, or any other publicly available information that they purportedly reviewed," writes US Circuit Judge Evan Wallach.

Mayer noted that both the prosecution history and specification show the patent's main claim "is limited to consumable liquid products." Yet Rothschild "has filed scores of infringement complaints, taking an exceptionally broad view of the scope of the patent." He continues:

The breadth of technologies that have been accused of infringement is remarkable, including such diverse products as home automation systems, home security systems, door locks, mobile apps, thermostats, digital cameras, irrigation sprinklers, coffeemakers, washers, dryers, baby monitors, air conditioners, microwave ovens, dishwashers, smoke detectors, ceiling fans, window shades, pool heaters, telephones, and horns. Rothschild’s continued assertions that its patent extends to products simply because they are configured using the Internet are risible rather than simply unreasonable.

"This suit never should have been filed, and ADS deserves to be fully compensated for the significant attorneys' fees it has incurred," writes Mayer.

RCDI is currently awaiting a ruling in a case regarding another company that is seeking attorneys' fees. In that case, it used the same '090 patent, in the same court, to sue Garmin International. Garmin's attorney has already filed a copy of the ADS Security fees opinion in that case, with relevant sections highlighted.

Further Reading

Leigh Rothschild has been featured as a "Spotlight Inventor" by Intellectual Ventures, the large patent-holding company, and has advocated against patent reform laws proposed in Congress.

"My lifelong passion is inventing," he declared (PDF) in a case where he sued the Coca-Cola Company earlier this year over a related patent. "I was issued my first United States Patent in my early twenties, and I have continued inventing since." Rothschild said he has more than 90 patents and 150 applications pending.

The same day that ADS Security was decided, a different panel of Federal Circuit judges considering a different case held that a judge who did award fees abused her discretion. In that case, Checkpoint Systems v. All-Tag Security, the judge tacked on a $6 million fee award after a jury exonerated the defendant.

"[T]he charge of infringement was reasonable and the litigation was not brought in bad faith or with abusive tactics," wrote Circuit Judge Pauline Newman.